I have been a CPA for over 30 years focusing on taxation. I have extensive experience with partnerships, real estate and high net worth individuals.
My ideology can be summarized at least metaphorically by this quote:
"I have a total irreverence for anything connected with society except that which makes the roads safer, the beer stronger, the food cheaper and the old men and old women warmer in the winter and happier in the summer." - Brendan Behan
Nobody I work for has any responsibility for what goes into this blog and you should make no inference that they approve of it or even have read it.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

Comments

This author is writing material simply on baseless facts and compiling material from other articles without sharing his own personal experience. You can simply google his name and find information about him which does not mean its necessarily him (or may be its him) http://www.truthinjustice.org/peter-reilly.htm Amway is a great business opportunity and people at every level cal make money. This author is putting baseless claims and none of him comes from his own experience. Its so sad to see such authors being allowed to put articles on credible website like Forbes.

Wow. A couple of things. My mother, God rest her soul, was Muriel(Lyons) Reilly. She died in 1993 of pancreatic cancer. To my knowledge no one has ever suggested that I had anything to do with it. The Peter Reilly you had a link to was accused of murdering his mother. Peter Reilly is a fairly common name. I suppose the fellow in Connecticut is more famous than me.

What I do is read original source tax material. I was reporting what that material says about Amway IBO’s who have been challenged by the IRS on the hobby loss rules. The cites to the cases are in the rather long post I previously wrote which is linked in this article.

My personal experience with the Amway opportunity was being invited to a meeting which I attended. I subsequently ran into the fellow who invited me and he was on to something else. As I noted in my post I am agnositc on the claims of the critics. The original source tax material tends to be supportive of their claims but it is clearly a small sample of the overall Amway business activity.

Frankly I’m also a little amazed that I have been accepted by Forbes so I can’t argue with you there.

If you want a lot of “personal experience” this would not be a good blog to read. Most of its content comes from reading a variety of tax material that many people find a little dense and pulling out items of interest. I don’t really think I’ll talk about my own tax situation, which is fairly mundane and I will certainly never say anyting about my clients except for the mythical ones like Robin and Terry.

A little more googling would have shown you that I am not the Peter Reilly you thought I might be. I’ve been striving to become the most famous Peter Reilly. If you do an image search I think you will find that I am one of the better looking ones.

Peter, In the US there are several hundred thousand people registered as Amway IBOs, of which you’re looking at I’d estimate more than 10 thousand actively building a business. There are probably Over the years millions have given it a try, most decide it’s not for them. Over a period of 25 years you found 23 cases. Does the IRS just randomly pick their “hobby loss” cases or do they target ones for which some red flags have appeared.

In that time period there’s likely been tens of thousands, perhaps hundreds of thousands who have submitted returns to the IRS including their Amway business.

Do you really think 23 cases, most likely picked because of problems, can be used to judge the hundreds of thousands of Amway business owners that the IRS processed without concern?

Hopefully your skills as an accountant are better than your skills in statistical analysis. And hopefully you knowledge of accountancy is way better than your knowledge about Amway.

There are numerous claims you’ve made here about Amway that are simply false. Yes, some of Amway’s cleaning products (ie “soap”) do often work out cheaper because they are more concentrated. But for many years now they’ve been a health & beauty company. The vast majority of their revenue comes from health & beauty products. And if I invite you around I might very well be doing so to educate you on nutrition or skin care. Amway’s the world’s #1 health supplement company and one of the top 5 in prestige and cosmetics. To describe it as a “soap company” because tha’s what they started with 52 years ago makes as much sense as talking about Nokia as a tyre company, or IBM as a typewrite company.

You then go on to repeat claims that most Amway products are purchased by IBOs. You’re mostly correct here, but only because virtually all Amway products are bought by IBOs. Amway does not sell directly to anyone else, that’s the role of IBOs. Now if you’re instead (which I suspect) claiming IBOs are the primary consumers of Amway products, then you might also be correct – but only because Amway let’s anyone register as IBOs and get distributor pricing. I can assure though that for the vast majority of them (way more than 23 in 25 years), the IRS would fall over laughing (as would you) if they tried to claim they were actually Business Owners (the BO part of IBO). They’re not. They’re simply consumers, much like CostCo members. Nearly 90% of people registered with Amway are simply customers. Of the other 10%, the vast majority would, along with buying products for themselves, also be on-selling to other customers. It’s Amway’s critics, like JoeCool, who would absurdly have you believe that all these people are running businesses.

You go on to repeat the myth that the “upline” makes most of their income from tools. I informed you of this in your comments before, yet you’ve cheerfully chosen to ignore it and repeat the myth. As I noted on that comment, with a link, Amway’s latest income figures have “Founders Diamond and above” earning an average of over $600,000/yr, from Amway products alone. When I inquired of one of the largest BSM (business support materials) companies how much they payout on average to Diamonds and above for promoting their products to their downline, it was a little over $22,000/yr. Dexter Yager, perhaps the best know of Amway high achievers and owner of one of the BSM companies, himself stated in a 60 minutes interview that he makes more for Amway than from his BSM activities. Have some made more money from this aspect than from Amway? Almost certainly, but just like 23 self-selected tax cases can’t be generalized to hundreds of thousands of IBOs, neither can a handful of Diamonds be generalised to the thousands of qualified Diamonds.

The fact there is *only* 23 cases against Amway IBOs is *not* supportive of the critics claims – in fact it’s likely the exact opposite. If you were to develop a hypothesis for a proper study of the matter, finding only 23 cases in 25 years would be evidence the thesis of the critics is false, not true.

I think I was pretty clear that I am agnostic about the claims of Amway critics and that the cases would not be a good sample. They will, however, represent a much larger number of audits. As I noted in my longer post there is an IRS audit manual that has a special address for making inquires with Amway.

The conclusion I reached is that someone with persistent Amway losses will not do well in an audit. I also noted that the criticism the Tax Court makes is consistent with the criticism of the Amway critics. You are right though that you really can’t make a statistical inference that there are not lots of people making tons of money as Amway IBO’s. It would also appear that if there are they avoid abusive tax shelters and lavish personal expenditures disguised as business expenses – like corporate jets, because I found no cases like that.

I apoligize for not doing full justice to the range of Amway products. I do use an ironic style that I have been told sometimes doesn’t translate well. In the right context I might refer to IBM as a company that makes high powered calculators. It also happens that the only “beauty” product I personally consume is soap.

10,000 people in the US actively building a business is a miserably low and misleading estimate. There are many functions going on all the time, some with more than 10,000 in attendance for one function. These nice folks are paying to attend these functions and likely losing money.

Mr. Reilly has posted 23 cases. What is he supposed to do? Post the tens of millions of cases? Although a bit dated, the Wisconsin attorney general, Bruce Craig, did a study of the platinums in Wisconsin and they on average, lost about $1000 a year. Nothing has happened since then would lead me to believe that the situation has changed, in fact, there are more tools and conventions these days so the losses are likely bigger.

Does Steadson really believe that everyone is signing up for Amway because they want to be customers? Why do IBOs sell products at or below cost on ebay? And what business can prosper in such a manners? It’s absurd. Do you open a McDonald’s because you want a discount on burgers? Yet you suggest this is common in Amway.

Some uplines do make more from tools than Amway. It’s very simple math. Since the tools have a much higher profit margin and fewer people sharing in the profits, the upline whether directly or not, are getting significant gains from tools. Let’s not forget that many function transactions are cash that may not even be report to the IRS.

23 cases is 23 cases. I don’t see any evidence supporting Amway as a good opportunity. Steadson himself has admitted to be basically inactive in Amway for a long time.

Funny how he says the stuff on my blog is false. If it were false, Amway would be warning me to remove it or face legal action. My blog is primarily my opinions and experiemces. Who are you to say my experience is false? Are you really saying my opinion is false too?

Peter – congratulations! You’ve attracted the attention of someone at Amway’s head office. When they were done here they came over to visit me! Copy and paste is a little off…. Oh well. They like you too!

I gave a quick review of the IRS study Peter did. The piece that jumped out at me is that there were 29 cases that went all way to court, and most of them lost for similar reasons. (You may say that 29 cases isn’t a lot, however to me that’s that leads me to believe that there are many more cases of audits, or the number of taxpayers who ended up forking over dough or settled prior to court, that we’ll never see.) To have that many cases and such consistency tells me there’s something majorly wrong with the business model.

So what’s wrong with the model? How can selling soap, vitamins, etc. to your friends and family be so damn expensive?! Well honestly, it’s not. In my opinion, the major expenses are incurred purchasing the business support materials that upline sells. Upline tells you that without their books, CD’s, seminars (usually referred to as “the system”), you’ll never succeed in the business. Now of course we were told that purchase of such materials is not required, but then they say “Purchase of tools/business support materials is optional, but then so is success”.

I gave a quick review of the IRS study Peter did. The piece that jumped out at me is that there were 29 cases that went all way to court, and most of them lost for similar reasons. (You may say that 29 cases isn’t a lot, however to me that’s that leads me to believe that there are many more cases of audits, or the number of taxpayers who ended up forking over dough or settled prior to court, that we’ll never see.) To have that many cases and such consistency tells me there’s something majorly wrong with the business model.

So what’s wrong with the model? How can selling soap, vitamins, etc. to your friends and family be so damn expensive?! Well honestly, it’s not. In my opinion, the major expenses are incurred purchasing the business support materials that upline sells. Upline tells you that without their books, CD’s, seminars (usually referred to as “the system”), you’ll never succeed in the business. Now of course we were told that purchase of such materials is not required, but then they say “Purchase of tools/business support materials is optional, but then so is success”.